Mike Kueber's Blog

July 4, 2012

ObamaCare and its tax penalty to enforce the individual mandate

Filed under: Issues,Medical,Politics — Mike Kueber @ 4:56 am
Tags: , ,

The major reaction to the Supreme Court’s validation of ObamaCare seems to be much ado about nothing.  Most Republicans are eager to assert that the Supreme Court approved ObamaCare only because the tax penalty on individuals who refuse to buy coverage can be characterized as a violation of President Obama’s pledge to not raise taxes on anyone making less than $250k a year.  By contrast, all Democrats claim that the tax penalty is a penalty on free riders, not a tax on taxpayers.  Mitt Romney has declined to assume the Republican position, and, surprisingly his spokesperson recently stated that Romney supported the Democratic characterization of “penalty” as opposed to the Republican position of “tax.”

I think the Democrats win this argument because most Americans are not opposed to tax increases that do not apply to them and thus they will not consider this to be a violation of Obama’s no-tax-increase pledge.  In this case, the penalty will apply to only those who can afford health insurance, but decline to buy it, and most Americans will be OK with penalizing such people.

(Incidentally, almost no new reports disclose the amount of the penalty.  When fully implemented in 2016, it will be $695 per person or 2.5% of family income, whichever is more.  Thus, a healthy, young person who makes $30k a year will face a penalty of $750 a year.  I suspect that will be a small fraction compared to the cost of buying a policy listed on one of the insurance exchanges.)

There is an adage that if it looks like a duck….  That is how I feel about this tax penalty, and I think Mitt Romney should confirm his spokesperson’s contention that the individual mandate in the Affordable Care Act penalty, not a tax.

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